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Information for VA home loan borrowers during COVID-19
VA Home Loans
Information for VA home loan borrowers during COVID-19
Below are some frequently asked questions for Veterans regarding the VA home loan policies related to the COVID-19 emergency:
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What if I’m having troubles making payments or have missed payments on my VA-guaranteed loan because I am experiencing financial hardships while the COVID-19 pandemic continues?
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What protections do I have for my VA loan while the COVID-19 pandemic continues?
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What is a forbearance?
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Should I request a COVID-19 forbearance?
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Does a forbearance mean the missed payments are forgiven or waived?
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How long is the forbearance period for COVID-19 affected loans?
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How do I apply for the COVID-19 forbearance?
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Do I have to make up all those payments in a lump sum at the end of the forbearance?
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Do my missed payments automatically move to the end of the loan?
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Will those missed mortgage payments hurt my credit score?
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What is loan deferment? Would deferring the missed payments prevent me from selling my home in the future?
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How do I make up missed payments and retain homeownership if I don’t get a COVID-19 forbearance? What about after my COVID-19 forbearance ends? What if I had missed payments unrelated to the COVID-19 situation?
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What if I can’t financially recover enough from the COVID-19 forbearance period to resume regular monthly mortgage payments afterwards?
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What can I do if I’m at risk of my loan being evicted or of my loan being foreclosed right now?
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Is there any assistance for renters or landlords?
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What if I am at-risk of becoming homeless?
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What other resources are available for homeowners?
The number one priority for anyone financially affected by COVID-19 is to ensure the health and safety of you and your family. Next, call your mortgage company right away. Your mortgage company offers free, expert assistance. While you might be worried about letting your mortgage company know about your financial hardships, your mortgage company is there to help you, and it is to your advantage not to wait, but to call them as soon as possible.
If you’re nervous about contacting your servicer, or if you’d like our help and advice, please contact a VA loan technician at 877-827-3702 or LGYLANational.VBACO@va.gov. When contacting a VA loan technician at LGYLANational.VBACO@va.gov, please provide the name and address on the loan.
2. What protections do I have for my VA loan while the COVID-19 pandemic continues?
There are multiple protections on your VA-guaranteed loan if you are experiencing financial hardship due to the COVID-19 emergency. The hardship can be direct or indirect. For example, you may be directly affected because you have lost your job, or you may be indirectly affected because of childcare situations that have decreased your monthly income or increased your costs.
Through the end of the nationally declared emergency, you can make an initial request for COVID-19 forbearance. VA expects your mortgage company to approve your request, for up to six months. VA also expects that, if you need additional forbearance after that, your mortgage company will approve, at your request, an additional COVID-19 forbearance for up to six months.
The moratorium on evictions ended on September 30, 2021.
The extension for the moratorium on foreclosures ended on July 31, 2021. This means that a mortgage company can begin a foreclosure beginning August 1, 2021. If a foreclosure began before the moratorium, it should have been put on hold until the moratorium ended. Similarly, if a foreclosure is already complete, there will not be an eviction while the eviction moratorium is in effect. (Note, though, these protections do not apply if you aren’t living in the property to be foreclosed.)
During the COVID-19 national emergency, taking advantage of forbearance options should not be considered delinquent for the purposes of credit report. You should also not have to worry about being charged additional costs for the COVID-19 forbearance. For example, a mortgage company cannot charge you a late fee as a result of granting you a COVID-19 forbearance.
Even if you do not want a COVID-19 forbearance, you may be able to take advantage of some other options that would work for your financial situation. VA provides for several options, ranging from refinance to loan modification. Please contact your mortgage company or VA to learn more.
In the home loan context, a forbearance usually means a time period (one month or longer) during which your mortgage company agrees to accept reduced payments or no payments on your loan. Your loan will continue to accumulate interest, but not late fees or other penalties. Here is a video on how a forbearance works under the CARES Act. While it is specific to the CARES Act, all COVID-19 forbearance mentioned in these FAQs is similar.
4. Should I request a COVID-19 forbearance?
Only you can make this decision, but here are some things to consider. If you can continue making payments despite the financial impact of COVID-19, you may not want to request forbearance. While not making monthly mortgage payments for six months may seem to have immediate benefits, the payments missed during the COVID-19 forbearance period will become due when the COVID-19 forbearance ends. Please see the questions and answers above to understand how this may affect you later.
5. Does a forbearance mean the missed payments are forgiven or waived?
No. The payments will still be due on your loan, just not during the forbearance period. A forbearance allows you time to resolve the reason that you can’t pay the regular monthly installment and get back on a regular monthly repayment schedule again.
6. How long is the forbearance period for COVID-19 affected loans?
COVID-19 forbearance is broken down into two pieces; an initial period and an additional period. To receive the initial period, you may notify your mortgage company that you are experiencing financial hardship due to the COVID-19 pandemic. As mentioned above, the hardship can be direct or indirect. When you notify the mortgage company, you may request up to 180 days of forbearance. You don’t have to use the entire forbearance period if you can resume payments sooner, but the deadline to request COVID-19 forbearance is through the end of the nationally declared emergency.
If you need the additional period, you may notify your mortgage company that you are still experiencing hardship due to the COVID-19 pandemic and request up to 180 additional days of forbearance. As with the initial period of forbearance, you don’t have to use the entire period of forbearance if you can resume payments sooner.
Please note, though, that if you requested COVID-19 forbearance on or before June 30, 2020, the length of continued forbearance is a bit different. VA expects mortgage servicers to approve, at your request, an additional three-month period of COVID-19 forbearance. If needed, another three-month period should be approved by the mortgage servicer. Although the total forbearance under this paragraph would equal an additional six months, each three-month extension should be requested individually.
Neither an initial COVID-19 forbearance nor an additional period of COVID-19 forbearance can extend past the end of the nationally declared emergency.
7. How do I apply for the COVID-19 forbearance?
You simply need to contact your mortgage servicer and request a COVID-19 forbearance because of financial difficulties due to the COVID-19 national emergency. The deadline to request this forbearance is the end of the nationally declared emergency.
8. Do I have to make up all those payments in a lump sum at the end of the forbearance?
No. VA has notified mortgage companies that the missed payments due at the end of a COVID-19 forbearance period do not have to be made up in a single payment. However, if you can make up the all the payments in a lump sum and resume making regular monthly mortgage payments, then you may do so.
9. Do my missed payments automatically move to the end of the loan?
No. Your mortgage servicer can’t automatically move those payments to the end of the loan because that would alter the recorded terms of your mortgage note. However, if it benefits you to handle repayment this way, you and your mortgage servicer can explore a loan modification to extend the term beyond the original maturity (paid-in-full) date of the mortgage loan. VA allows modified loans to be extended up to 360 months (30 years), as long as the extension is 120 months (10 years) or less from the original maturity date on your mortgage note.
10. Will those missed mortgage payments hurt my credit score?
It depends. Under normal circumstances, missed or delayed payments have an impact on your credit score. During the COVID-19 national emergency, however, if you were current on your mortgage when the COVID-19 forbearance was granted, your mortgage company should report your account as current. This may not apply if you were already behind on your mortgage when the COVID-19 forbearance was requested. It may be that your mortgage company has to maintain the delinquent status. If you bring your mortgage current, your mortgage company should report the credit obligation or account as current.
Loan deferment is when your lender defers payments to the loan maturity date or until you refinance your loan or sell the home. The missed payments are still a part of the overall amount owed, but not part of the principal balance. Hence, the deferred amount will not gain interest.
A deferred amount would not prevent you from selling your home. However, the deferred amount would be connected to your loan until the deferred amount is repaid. If you do not repay it by the time you are ready to sell your home, it would come due as a part of the sale.
The deferred amount must be paid by the existing loan maturity date, when the property is sold, or anytime the loan is paid in full. But a deferment does not extend the maturity date of your loan.
Generally, you and your lender could agree to "roll the payments in" to the end of the loan by extending the maturity date by the number of missed payments. However, that would require a loan modification. It would not be a deferment.
Contact your mortgage company to explore three basic options to make up missed payments and retain your home:
- Special Forbearance: Special forbearance is a longstanding loss mitigation option to help Veterans who have run into temporary financial difficulties. It is different from a COVID-19 forbearance and is not specific to financial hardships due to the COVID-19 pandemic. As discussed above, a forbearance is a time period that the mortgage servicer agrees to accept reduced payments or no payments. If you missed payments before the declaration of the COVID-19 national emergency, a special forbearance could be an option. It may also be an option if your COVID-19 forbearance ends and you need additional time to make up the missed monthly payments.
- Repayment plan: You and your mortgage company can agree to terms where you pay a specified amount paid above the regular monthly mortgage payment to bring your loan current over time.
- Loan Modification: As mentioned above, a modification may be appropriate, if you resolved or plan to resolve the reason for default and can resume making regular monthly mortgage payments, but you can’t afford to pay the additional amount to make up the missed payments over time. Your mortgage company may offer an option to modify your existing mortgage note to extend the term (time to repay) of your loan. Missed payments are included in the loan amount and your new principal balance is amortized (paid off) over the new remaining term of your loan to reduce the burden of repayment. Keep in mind that a loan modification may change your interest rate.
VA will offer two short-term programs to provide financial options to help those who have received COVID-19 forbearance. These one-time secondary VA options are called the COVID-19 Veterans Assistance Partial Claim Payment program (COVID-VAPCP) and COVID-19 Refund Modification. The COVID-VAPCP is intended for those Veteran Borrowers that are ready to resume making monthly mortgage payments at the previous rate but cannot afford to make up the missed payments. VA will purchase the missed payments and establish a second lien. The second lien will last for the life of your VA-guaranteed loan and will have a zero percent interest rate so the amount owed will never go up. The second lien may be paid by scheduled payments or as part of a payoff if you sell or refinance your home. Veteran borrowers qualifying for the COVID-VAPCP must have been on a COVID forbearance, occupy the property as a main residence and have been current or within 30 days of current on March 1,2020. The VAPCP will only be available from July 27, 2021 through October 28, 2022.
The COVID-19 Refund Modification is intended for those borrowers that have not been able to recover from the pandemic to the same financial income level as prior to the pandemic. Those Veteran borrowers would be able to afford regularly scheduled monthly mortgage payments but not at the pre-pandemic amount. The COVID-19 Refund Modification is designed to give Veterans and their families an opportunity to retain home ownership with a reduced monthly mortgage payment. As with the previously mentioned COVID-VAPCP, VA will establish a second lien for any portion of the loan VA purchased to provide payment relief to the borrower. The second lien may be paid by scheduled payments or as part of a payoff if you sell or refinance your home. Veteran borrowers that qualify must have been on a COVID forbearance, occupy the property as a main residence and been within 120 days current on March 1, 2020. The Refund Modification will only be available from July 27, 2021 through July 1, 2023.
If you are unable to resume regular monthly mortgage payments, you have options to better protect your credit rating and still qualify for a new home loan later. These basic options to avoid foreclosure are:
- Private Sale: This is the standard home sale transaction. It is when you sell the property at a price that will repay the loan in full.
- Short Sale: If you cannot sell the property for an amount that would fully pay off the loan, you might be able to work with your mortgage company to arrange for a short sale. This allows you time to sell the property, perhaps for less than you owe. A mortgage company may be willing to do this because the mortgage company can submit a claim against the VA-guaranty to help offset the mortgage company’s losses. *This option could result in a loss or reduction in your future home loan benefit. Contact a VA loan technician at 877-827-3702 for more details.
- Deed in Lieu: ou may be able to choose to deed the property to your mortgage servicer instead of going through a foreclosure action. As with a short sale, A mortgage company may be willing to agree to this because the mortgage company can submit a claim against the VA-guaranty to help offset the mortgage company’s losses. *This option could result in a loss or reduction in your future home loan benefit. Contact a VA loan technician at 877-827-3702 for more details.
14. What can I do if I’m at risk of my loan being evicted or of my loan being foreclosed right now?
The established eviction moratorium on federally-backed loans (including VA home loans) ended on September 30, 2021.
If you are at risk of being foreclosed, you should contact your mortgage company right away to discuss options that would work for your financial situation. During the COVID-19 national emergency, you may be eligible for the COVID-19 forbearance, but must request this through your mortgage company by the end of the nationally declared emergency.
15. Is there any assistance for renters or landlords?
Yes, state and local programs are taking applications from renters and landlords to distribute money from the U.S. Department of Treasury’s Emergency Rental Assistance (ERA) program in their own communities. The money can help landlords and renters who are struggling to keep up with rent and other bills.
Many programs take applications from both landlords and renters.
To find your local program, who qualifies and how the money can be used, go to www.consumerfinance.gov/renthelp
16. What if I am at-risk of becoming homeless?
If you are in danger of becoming homeless, please visit https://www.va.gov/homeless/HousingResources/ or call (877) 424-3838 or utilize the Homeless Veteran Chat system to receive immediate assistance from VA.
17. What other resources are available for homeowners?
The Consumer Financial Protection Bureau (CFPB) has a “Find a Counselor” tool to find counseling agencies approved by the Department of Housing and Urban Development (HUD) in your area. You can also call the HOPE™ Hotline open 24 hours a day, 7 days a week, at (888) 995-HOPE (4673) for personalized advice. Other mortgage and financial resources are available at: https://www.consumerfinance.gov/coronavirus/.
The American Rescue Plan Act allows up to $9.961 billion for the United States, U.S. territories, Tribes or Tribal entities, and the Department of Hawaiian Homelands to provide relief for our country’s most vulnerable homeowners. The Homeowners Assistance Fund is intended to prevent mortgage delinquencies and defaults, foreclosures, loss of utilities or home energy services, and displacement of homeowners experiencing financial hardship after January 21, 2020. Funds from the HAF may be used for assistance with mortgage payments, homeowner’s insurance, utility payments, and other specified purposes. Note: The HAF program prioritizes those experiencing the greatest hardship and varies by state.
- VA - Frequently Asked Questions about HAF
- U.S. Treasury - Homeowners Assistance Fund website
- NCSHA - Homeowner Assistance Fund by state
For more information on the VA Home Loan program, you may call (877) 827-3702 to contact the nearest VA Regional Loan Center, or visit our website at www.benefits.va.gov/homeloans/